Anil Bharwani

Personal Real Estate Corporation

Re/Max LifeStyles Realty


Direct (604) 476-1111

Office (604) 466-2838

RSS

BoC sounds the alarm over market imbalance – sort of

by Olivia D'Orazio11 Dec 2014
 

While the Bank of Canada said it’s worried about a potentially overvalued housing market, the country is not about to host the kind of crash that plagued many cities in the United States.

 

In its biannual Financial System Review, the BoC said Canada’s housing market could be overvalued by 10 to 30 per cent, but said we’re not currently seeing the kind of spike in housing prices that preceded corrections in the early 1980s and early 1990s.

 

“Highly-indebted households would have [difficulty] servicing their debt if they were to face a sharp decline in their incomes or a sharp rise in interest rates,” said Governor Stephen Poloz in a press release. “This situation raises the risk that a shock to the economy could trigger a correction in house prices. The probability of this risk materializing is low, but if it did occur, the effect on the economy would be severe.”

 

For now, the national economy – and by extension, the housing market – is benefitting from rising immigration and the continued strengthening of the U.S. economy. House prices are still rising, mainly due to still-low mortgage rates.

 

“The further decline in mortgage rates over 2014 has supported housing activity,” the BoC said in its report. “Sales of existing homes have picked up noticeably from the weather-related weakness at the beginning of the year and now exceed their 10-year average. Housing starts have been broadly in-line with demographic demand.”

 

For these reasons, according to the BoC, Canadian agents don’t need to duck and cover just yet.

“None of those conditions is present today,” Poloz said. “The rise in house prices has been much more gradual and, in the context of a broadening recovery, the unwinding of household imbalances should be gradual as well. 

 

“That is why we continue to expect a soft landing in the housing market, but it is conditional on continued strengthening in the economy.”

Comments:

No comments

Post Your Comment:

Your email will not be published
Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Greater Vancouver REALTORS® (GVR), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the GVR, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the GVR, the FVREB or the CADREB.